Cross-border LBOs

Cao, Jerry; Cumming, Douglas J.; Qian, Meijun; Wang, Xiaoming

doi:10.1016/j.jbankfin.2014.08.027

Cited by 66 publications

(20 citation statements)

References 57 publications

(59 reference statements)

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“…At the country level, researchers have looked largely at the institutional attractiveness of specific target countries, including factors such as intellectual property protection, relative size of economies, compatibility of legal and economic systems, market liquidity, and international trade levels. A number of studies have focused specifically on cross‐border VC deals (e.g., Bertoni & Groh, ; Bruton & Ahlstrom, ; Bruton, Fried, & Manigart, ; Cao, Cumming, Qian, & Wang, ; Cumming, Fleming, & Schwienbacher, ; Iriyama et al, ; Madhavan & Iriyama, ; Mäkelä & Maula, ).…”

Section: Internationalization Vcs and Uncertaintymentioning

confidence: 99%

Geographic, Network, and Competitor Social Cues: Evidence from U.S. Venture Capitalists Internationalization Decisions

Vedula

Matusik

2017

Strategic Entrepreneurship

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Research summary: We examine how social cues drive strategic decision making under uncertainty, specifically in the context of U.S. VC firms' first internationalization decisions. We compare the relative impacts of cues from: (a) geographically proximal firms, (b) syndicate partners, and (c) VCs investing in the same industries as the focal firm. Over the 23-year period from 1990 to 2012, we find that cues from geographically proximal peers are important, while syndicate partner actions play a significant but smaller role in driving focal firm internationalization decisions. Analogous, firm-specific experience in the form of nonlocal (but domestic) investing attenuates the effect of geographically proximal peers. Our findings have important implications on how the nature of information from social cues affects imitation decisions.Managerial summary: The U.S. venture capital industry has globalized rapidly over the past two decades, but the decision to invest abroad is still a highly uncertain one, particularly for firms with no prior global experience. We examine the extent to which such initial internationalization decisions are driven by social cues, comparing the relative impacts of social cues from: (a) geographically proximal firms, (b) syndicate partners, and (c) VCs investing in the same industries as the focal firm. We find that the foreign investment decisions of geographically proximal peers have the strongest impact, while syndicate partner actions play a smaller role. The impacts of geographically proximal peers are also weaker for firms that have analogous experience, in the form of nonlocal (but domestic) investing.

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Section: Internationalization Vcs and Uncertaintymentioning

confidence: 99%

Geographic, Network, and Competitor Social Cues: Evidence from U.S. Venture Capitalists Internationalization Decisions

Vedula

Matusik

2017

Strategic Entrepreneurship

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“…For an extensive literature review on corporate governance convergence, see Yoshikawa and Rasheed (2009). For a related study that focuses on the impact of creditor rights on cross-border leverage buyouts for example, see Cao, Cumming, Qian, and Wang (2015).…”

Section: Discussionmentioning

confidence: 99%

Agency Costs of Moving to Tax Havens: Evidence from Cross‐border Merger Premia

Col

2016

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This paper explores the valuation effects of the tradeoff between tax avoidance and corporate governance through tax haven M&As. Firms can achieve tax savings by selling to an acquirer based in a tax haven, making the newly created multinational a haven resident. Changing a firm's tax home through a 100 percent acquisition is also accompanied by a change in legal system and corporate governance. Therefore, tax savings could come at the expense of corporate governance degradation making the value implications of such tax avoidance attempts an important empirical issue. Research Findings/Insights: Using an international sample of cross-border M&As from 1989 to 2012, we find value evidence supporting the agency costs hypothesis. For 100 percent M&As, a lower target premium is associated with those transactions where the tax haven acquirer has weaker investor protection than the target. Theoretical/Academic Implications: Our findings provide value evidence regarding the agency costs of tax-motivated M&As as a result of the secrecy laws and limited investor protection of tax havens. Practitioner/Policy Implications: This study provides a perspective for executives of multinational firms to take into account the value consequences associated with secrecy laws and weak investor protection while considering a possible relocation to tax havens. It also offers further insight to policymakers concerning the costs of limited investor protection and lack of transparency.

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“…These results are more pronounced in target firms with less institutional ownership, suggesting that institutions can bargain more effectively with clubs, offsetting some of the effects of reduced competition on prices. Cao, Cumming, Qian, and Wang (2015) further reveal that the premium difference between club deals and single-bidder deals is larger in countries with weak creditor protection (where debt financing is harder to obtain).…”

Section: Bidder Competitionmentioning

confidence: 93%

Leveraged Buyouts: A Survey of the Literature

Renneboog

Vansteenkiste²

2017

SSRN Journal

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This paper provides an exhaustive literature review of the motives for public-to-private LBO transactions. First, the paper develops the theoretical framework for the potential sources of value creation from going private: a distinction is made between the reduction in agency costs, stakeholder wealth transfers, tax benefits, transaction costs savings, takeover defense strategies, and corporate undervaluation. The paper then reviews and summarizes whether and how these theories have been empirically verified in the four different strands of literature in LBO research. These strands of literature are categorized by phase in the LBO transaction: Intent (of a buyout), Impact (of the LBO on the various stakeholders), Process (of restructuring after the leveraged buyout) and Duration (of retaining the private status). Then, the paper shows that in the first half of the 2000s, a public-to-private LBO wave re-emerged in the US, UK and Continental Europe, whose value vastly exceeded that of the 1980s US LBO wave. Finally, the paper provides suggestions for further research.

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Cross-border LBOs

Cited by 66 publications

References 57 publications

Geographic, Network, and Competitor Social Cues: Evidence from U.S. Venture Capitalists Internationalization Decisions

Geographic, Network, and Competitor Social Cues: Evidence from U.S. Venture Capitalists Internationalization Decisions

Agency Costs of Moving to Tax Havens: Evidence from Cross‐border Merger Premia

Leveraged Buyouts: A Survey of the Literature

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